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The global cosmetic company does not expect slowing demand in China due to trade tensions and Hong Kong protests.
The global cosmetic company does not expect slowing demand in China due to trade tensions and Hong Kong protests.

Estee Lauder forecasts robust fiscal 2020

INTERNATIONAL NEWS

By Aditi Sebastian - Aug 20th, 09:47

Estee Lauder forecast full-year revenue and profit above Wall Street expectations, putting to bed concerns of slowing demand in China due to trade tensions and Hong Kong protests as sales of its luxury skincare products soared, propelling its shares to a record high. 

Cosmetic companies such as Estee Lauder and L’Oreal are seeing a boom in their business in the Asia-Pacific region, mainly in China, as affluent millennials spend more at beauty retailers and duty-free stores at airports.

Shares of Estee Lauder, which reported better-than-expected fourth-quarter results, rose as much as 11% to $198.62.

The company has been selling 10 of its brands’ products including MAC and Tom Ford on Alibaba’s online marketplace Tmall, in a bid to boost its presence in the Asian market.

The efforts helped sales in the region grow 18% in the fourth quarter, while sales in the skincare business, its biggest and most profitable, rose 15% to $1.59bn, boosted by demand for its premium skincare brands such Clinique.

Estee Lauder expects full-year sales to grow between 7% to 8% and adjusted profit between $5.90 and $5.98 a share in fiscal 2020.

Analysts had expected sales growth of 6.87% and profit of $5.81 a share.

Estee Lauder, which also forecast first-quarter sales growth and profit above expectations, said the outlook took into account the potential impact of the Hong Kong protests and the protracted US-China trade dispute, as well as costs related to Britain’s impending exit from the European Union.

“We are not seeing any slowdown in China at this point in time,” CEO Fabrizio Freda said.

Freda said Hong Kong, including travel retail, represented less than 4% of the company’s business globally, and the company was working to recover some of the potential losses in Hong Kong from other markets.

“We are a little surprised by Estee’s aggressive approach to guidance for the year,” RBC analyst Nik Modi said.

Overall, quarterly net sales rose 9% to $3.59bn, beating expectations of $3.53bn, according to IBES data from Refinitiv.

Excluding items, it earned 64c a share, beating estimates by 11c.

Business Live 

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